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The U.S. Court of Appeals for the Fourth Circuit upheld a Federal Trade Commission ruling that the North Carolina State Board of Dental Examiners illegally thwarted lower-priced competition by engaging in anticompetitive conduct to prevent non-dentists from providing teeth whitening services to consumers in the state.

The unanimous decision, issued on May 31, denied the North Carolina Dental Board’s petition to review the FTC’s December 2, 2011 Decision and Order, which held that the board violated Section 5 of the FTC Act.

“We are pleased that the Fourth Circuit agreed that a state regulatory board dominated by self-interested private actors cannot shield its anticompetitive conduct from antitrust review using the state action doctrine,” said FTC Chairwoman Edith Ramirez.  “This decision, as did the Supreme Court’s unanimous decision in FTC v. Phoebe Putney earlier this year, recognizes that exemptions to the antitrust laws are to be applied narrowly and that consumers are best off when there is vigorous competition.”

According to the FTC’s administrative complaint against the Dental Board, the Board sent dozens of cease and desist orders to non-dentist teeth whiteners stating that they were practicing dentistry illegally, and ordering them to stop. The Dental Board also threatened or discouraged non-dentists who were considering opening teeth whitening businesses. The complaint also alleged that the Dental Board sent letters to mall owners and property management companies urging them not to lease space to non-dentist teeth whitening providers.

In its 2011 Decision and Order, the FTC found that the Dental Board’s actions were illegal and led to higher prices and reduced choices for consumers. The Commission concluded that the Dental Board’s conduct had a clear tendency to suppress competition and lacked any countervailing procompetitive virtue. In addition, the Commission found that there was direct evidence of anticompetitive effects. In its opinion, the Appeals Court agreed with the FTC that the Dental Board’s actions were the product of a “combination or conspiracy” under Section 1 of the Sherman Act, and that they constituted an unreasonable restraint of trade. 

The Court of Appeals rejected the Dental Board’s claim that the Board’s conduct is protected from federal antitrust scrutiny by the state action doctrine, which exempts some conduct by states from antitrust oversight. The Court held that a state entity composed of participants in the regulated market, who are chosen by and accountable to their fellow market participants, are “private actors.” It cited a previous Supreme Court decision (California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980)) that held private actors are protected from federal antitrust scrutiny only if there is “clear articulation” of a state policy to displace competition, and “active supervision” by the state. The key issue resolved by the Court involved the second requirement; requiring active supervision for a financially-interested Board. 
“At the end of the day, this case is about a state board run by private actors in the marketplace taking action outside of the procedures mandated by state law to expel a competitor from the market,” Judge Shedd’s opinion states.

The Commission’s Final Order prohibits the Dental Board from, among other things, ordering non-dentists to stop providing teeth whitening products or services. The Final Order also requires the Dental Board to stop informing non-dentist teeth whitening providers and certain other persons that it is illegal for non-dentists to provide teeth whitening products or services.  The Final Order specifically does not prohibit the Dental Board from investigating other non-dental providers for suspected violations of the State’s Dental Practice Act, filing a court action against a non-dentist for alleged violations of the Act, or communicating its belief or opinion regarding whether a particular method of teeth whitening may violate the Dental Practice Act.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action.  To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., N.W., Room 7117, Washington, DC 20001.  To learn more about the Bureau of Competition, read Competition Counts.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.